Tech stock bounce holds hope for online brokers
January has seen a mini recovery in the NASDAQ from a low of 2300 to approximately 2800. We are still way off the highs of around 5000 reached in March 2000 when large volumes of technology shares were traded through online brokers, however, the resurgence holds hope for those online brokers who live and die by trading volumes.
On the local market Etrade and Davnet made gains over the month of 45% and 39% respectively. These figures give us some hope that tech stocks have finally found their bottom after plummeting several times during 2000. It was retail investors, many trading via online brokers, that helped fuel tech stocks to their peak in March 2000.
Since the correction in March / April 2000 trading volumes via online brokers have fallen dramatically, which despite growth in accounts, has significantly impacted earnings. Online brokers have reacted by expanding the services on offer in order to earn non – trading volume related revenues eg. Managed funds.
A survey by research firm AMR Interactive, as reported in the Australian Financial Review 1/2/2001, reports that availability of a range of financial services from online brokers was the least important feature that people were looking for. In greatest demand were cheaper brokerage rates and straight through processing. This evidence seems to suggest doom and gloom for both options of online brokers – expand or specialise. Ultimately success will come down to who services the investor most effectively.